Eskom coal-supply crisis on the horizon

ESKOM’s coal supply could be depleted by 2016 unless new mining projects come on stream, an IHS McCloskey coal conference in Cape Town heard on Wednesday.

South Africa is one of the world’s largest suppliers of thermal coal, but most of the product is exported to Europe and fast-growing markets in Asia, mainly China and India.

Most of the coal reserves are in the Waterberg region in Limpopo, but in light of extensive infrastructure backlogs there, companies are reluctant to begin new mining projects because of the high costs involved.

Ian Hall, chairman of the steering committee of the South African Coal Road Map, told the conference that about 60-million tons of new coal capacity had to come on stream from 2015 to secure Eskom’ s supply.

"Eskom is facing a serious shortage … this creates both an opportunity and challenge for the coal mining industry," he said.

JSE-listed diversified miner Exxaro’s Grootegeluk mine is the only major coal mining operation in the Waterberg region. Resource Generation and Firestone Energy have yet to start development of their proposed mining projects in the Waterberg.

Former Eskom executive director Mike Deats on Wednesday further warned at a National Energy Regulator of South Africa hearing in Midrand that a lack of development in the Waterberg compromised the power utility’s ability to plan strategically beyond 2018.

Mr Deats highlighted a project Eskom proposed that would require it to transport coal from the Waterberg coalfield.

"Coal trucks are damaging the roads, but they have failed to start on plans to build the railway lines," he said.

Mineral Resources Minister Susan Shabangu told the conference in Cape Town that coal would be designated as a "strategic resource", which could limit exports to protect supplies for domestic power plants.

Eskom relies on coal to generate 85% of South Africa’s electricity and has raised concerns about the quality and quantity of coal received from local producers.

Ms Shabangu has previously said that coal producers favour exports over supplies to Eskom as they enjoyed higher returns in the export market.

The classification of coal as a strategic mineral was included in proposed amendments to the Mineral Resources Petroleum Development Act, Ms Shabangu said. This followed resolutions adopted at the African National Congress’s Mangaung conference last month, where delegates decided that 11 commodities produced in South Africa should be classified as strategic.

"I have no doubt that the coal mining industry is prepared to share in the government’s responsible position," she said, alluding to the tough discussions on the amendments to the act that lie ahead.

Ms Shabangu said the government, alongside the coal industry, needed to find a balance between ensuring ample supply for the country’s energy needs, while also maintaining competitive exports.

Based on her assessments, coal accounted for 18% of the revenue that South Africa generated from commodity exports, and was ranked as the fourth-largest mineral that the country produced.

In this article

ESKOM’s coal supply could be depleted by 2016 unless new mining projects come on stream, an IHS McCloskey coal conference in Cape Town heard on Wednesday.

South Africa is one of the world’s largest suppliers of thermal coal, but most of the product is exported to Europe and fast-growing markets in Asia, mainly China and India.

Most of the coal reserves are in the Waterberg region in Limpopo, but in light of extensive infrastructure backlogs there, companies are reluctant to begin new mining projects because of the high costs involved.

Ian Hall, chairman of the steering committee of the South African Coal Road Map, told the conference that about 60-million tons of new coal capacity had to come on stream from 2015 to secure Eskom’ s supply.

"Eskom is facing a serious shortage … this creates both an opportunity and challenge for the coal mining industry," he said.

JSE-listed diversified miner Exxaro’s Grootegeluk mine is the only major coal mining operation in the Waterberg region. Resource Generation and Firestone Energy have yet to start development of their proposed mining projects in the Waterberg.

Former Eskom executive director Mike Deats on Wednesday further warned at a National Energy Regulator of South Africa hearing in Midrand that a lack of development in the Waterberg compromised the power utility’s ability to plan strategically beyond 2018.

Mr Deats highlighted a project Eskom proposed that would require it to transport coal from the Waterberg coalfield.

"Coal trucks are damaging the roads, but they have failed to start on plans to build the railway lines," he said.

Mineral Resources Minister Susan Shabangu told the conference in Cape Town that coal would be designated as a "strategic resource", which could limit exports to protect supplies for domestic power plants.

Eskom relies on coal to generate 85% of South Africa’s electricity and has raised concerns about the quality and quantity of coal received from local producers.

Ms Shabangu has previously said that coal producers favour exports over supplies to Eskom as they enjoyed higher returns in the export market.

The classification of coal as a strategic mineral was included in proposed amendments to the Mineral Resources Petroleum Development Act, Ms Shabangu said. This followed resolutions adopted at the African National Congress’s Mangaung conference last month, where delegates decided that 11 commodities produced in South Africa should be classified as strategic.

"I have no doubt that the coal mining industry is prepared to share in the government’s responsible position," she said, alluding to the tough discussions on the amendments to the act that lie ahead.

Ms Shabangu said the government, alongside the coal industry, needed to find a balance between ensuring ample supply for the country’s energy needs, while also maintaining competitive exports.

Based on her assessments, coal accounted for 18% of the revenue that South Africa generated from commodity exports, and was ranked as the fourth-largest mineral that the country produced.

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